January 8, 2019 / 7:35 AM / 5 months ago

UPDATE 3-Christmas sales growth slows at UK's Morrisons as discounters thrive

    * Morrisons misses analysts' Christmas sales forecasts
    * Market data shows Aldi, Lidl performing strongly
    * Asda best performer of big four, Tesco solid
    * Morrisons shares fall as much as 4.8 percent
    * UK grocers' market share: tmsnrt.rs/2RCNN7f

 (Adds detail, analyst comment, Kantar table, shares)
    By James Davey and Kate Holton
    LONDON, Jan 8 (Reuters) - Morrisons, Britain's No. 4
supermarket chain, reported weaker-than-expected Christmas sales
with growth slowing at both its retail and wholesale businesses,
as discounters Aldi and Lidl emerged as the major winners over
the festive period.
    Bradford, northern England-based Morrisons has reported
three years of underlying sales growth, but its shares fell as
much as 4.8 percent on Tuesday after it missed analysts'
forecasts for overall Christmas trading.
    Traditionally, British consumers have traded-up to Britain's
big four supermarket chains - market leader Tesco,
Sainsbury's, Asda and Morrisons - as
well as upmarket players Marks & Spencer and Waitrose
           in the run-up to Christmas. 
    However, that pattern has changed in recent years as
German-owned Aldi and Lidl have invested heavily in, and
promoted, premium lines.
    Market researcher Kantar Worldpanel said two-thirds of all
British households shopped at either Aldi or Lidl over the 12
weeks to Dec. 30, resulting in their highest-ever combined
Christmas market share of 12.8 percent.
    Kantar and rival researcher Nielsen both reported
Walmart-owned Asda as the top Christmas performer among
the big four, followed by Tesco and Morrisons and with
Sainsbury's the laggard. However, all four lost market share to
the discounters.
    Shares in Tesco rose as much as 4.3 percent as its
performance was perceived as solid. Tesco is due to report on
Thursday and Sainsbury's on Wednesday. 
    On Monday, Aldi said December sales rose around 10 percent
to almost 1 billion pounds ($1.3 billion).
    The march of the discounters has forced the big four to
reassess their strategies. They have cut prices and costs to
better compete, while No. 2 Sainsbury's has proposed a 7.3
billion pound takeover of No. 3 Asda to increase buying power -
a deal now being assessed by the competition regulator.

    Morrisons and Tesco both launched another wave of price cuts
on Monday.
    
    TOUGH NOVEMBER
    Morrisons said its like-for-like sales, excluding fuel, rose
3.6 percent in the nine weeks to Jan. 6 - below analysts'
average forecast of 4.1 percent and growth in the previous
quarter of 5.6 percent.
    Retail sales its stores rose 0.6 percent, compared with 1.3
percent in the previous quarter, while wholesale sales rose 3
percent, compared with 4.3 percent in the quarter before. 
    In common with other UK retailers, Morrisons highlighted a
change in consumer behaviour in November, amid uncertainty over
whether Britain will agree a negotiated withdrawal from the
European Union in less than three months' time. 
    "Going into November there was just a sense that customers
were a bit more cautious," Morrisons Chief Executive David Potts
told reporters.    
    "A feeling of uncertainty in the country may have led to
some of that feeling," he said, referencing "the macro/political
situation."
    Britons have also had to cope with muted wage growth in
recent years, forcing them to rethink the way they shop.
    "Shoppers (are) now opting to spend less on doing one big
shop; instead preferring more frequent, smaller trips to the
supermarket, spreading the cost across multiple retailers to
increase choice," said Mike Watkins, Nielsen’s UK head of
retailer insight.
    Morrisons did, however, stick to its expectations for its
2018-19 financial year ending Feb. 3. Prior to Tuesday's update,
analysts were on average forecasting a 2018-19 pretax profit of
409 million pounds, up from 374 million in 2017-18.
    With a disorderly Brexit a possibility, Potts said Morrisons
had stepped-up preparations, working with freight firms and
suppliers to check their state of readiness, particularly
regarding potential disruption and delays at ports.

Market share and sales growth (percent)
                  12 wks to     12 wks to     pct change
                  Dec 30 2018   Dec 31, 2017  in sales
 Tesco            27.8          28.1          0.6
 Sainsbury's      16.2          16.5          -0.4
 Asda             15.2          15.3          0.7
 Morrisons        10.6          10.8          0.1
 Aldi             7.4           6.8           10.4
 Co-operative     5.9           5.8           3.2
 Lidl             5.4           5.0           9.4
 Waitrose         5.0           5.2           -1.7
 Iceland          2.3           2.2           1.8
 Ocado            1.0           1.1           1.3
    Source: Kantar Worldpanel
    ($1 = 0.7829 pounds)

    
 (Reporting by James Davey; Editing by Jane Merriman and Mark
Potter)
  
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